After Supreme Court Push, Centre To Cap Cancer Drug Margins At 30%

Solicitor General Tushar Mehta informed the Supreme Court today that the Union government has decided to cap trade margins on cancer drugs at 30% of their maximum retail price (MRP).

Mehta told a bench of Justice Vikram Nath and Justice Sandeep Mehta that the government would announce a list of cancer medicines to which the cap would apply. The list would be updated periodically to include additional anti-cancer medicines in response to market developments and public health considerations.

The Union government's decision follows the Court's sharp observations during earlier hearings about cancer medicines being sold at MRPs up to ten times their price to retailers (PTR).

According to an affidavit filed by the Department of Pharmaceuticals in the pending proceedings, the decision was taken at a meeting of the National Pharmaceutical Pricing Authority (NPPA) on October 8.

The government has also constituted an expert committee under the Director General of Health Services to recommend a list of cancer medicines for inclusion under the proposed trade margin regulation. The committee has been asked to submit its recommendations within 10 to 15 days, the affidavit states.

The affidavit states that the proposed cap is expected to reduce MRPs of cancer drugs by an estimated 20% to 70%, resulting in annual savings of approximately ₹2,500 crore for patients.

“The most significant of such steps is the decision of the Government to cap the trade margin on anti-cancer drugs at 30% of the Maximum Retail Price (MRP), which is expected to result in annual savings of approximately 32,500 crore to patients”, the affidavit states.

The government has proposed retaining a reasonable margin for the trade channel while preventing excessive markups. The measure will initially cover all drugs approved for cancer treatment except inexpensive medicines, according to the affidavit.

However, the Court questioned why the proposed intervention was confined to cancer medicines. Justice Mehta highlighted the price disparity in medical devices and other medicines and questioned the rationale for limiting the intervention to cancer drugs.

“For an ordinary cardiac stent, Indian made stent, price to retailer (PTR) is Rs. 5000 but MRP is Rs. 25000,” he observed. He remarked that if the margin were capped at 16%, medical interventions could reduce substantially because doctors are influenced by the margins available on medicines and devices. Justice Mehta also cited the example to a saline drip line with an MRP of ₹11 being sold for ₹270.

The bench also questioned how manufacturers could fix an MRP several times higher than the price at which medicines were supplied to retailers.

Additional Solicitor General Aishwarya Bhati submitted that pricing was only one aspect of the government's policy and a balance had to be maintained between affordability, availability and market considerations.

The Court questioned why the government could not regulate the entire range of medicines. Bhati responded that India already had among the lowest medicine prices and excessive government intervention could adversely affect the market and the availability of drugs.

The Court however, pressed the Centre to explain how the existing approach protected patients. Justice Mehta questioned Bhati's explanation about availability of drugs, asking whether medicines subject to prescribed 16% retailer margin under the Drugs (Prices Control) Order (DPCO), 2013, failed to reach consumers.

The Solicitor General referred the bench to the affidavit filed by the Union government, which sets out the reasons for the proposed intervention as well as the concerns associated with extending trade margin regulation to other medicines.

What the Centre's affidavit says

The Union government's affidavit acknowledges concerns about high trade margins in the pharmaceutical market but contends that interventions must be calibrated to avoid affecting the availability of critical medicines.

The Union government has told the Supreme Court that hospitals purchase medicines from manufacturers offering the highest trade margins and then sell them to patients at the maximum retail price (MRP), with margins ranging from 170% to 700% or more in the case of cancer medicines.

In the affidavit, the Department of Pharmaceuticals has also acknowledged that hospital consumables carry margins ranging from 100% to 1,000% or more.

The Centre has said that it is aware of the problem of excessive trade margins but maintained that regulatory interventions must be calibrated to ensure that medicines remain available to patients. It has decided to cap trade margins on anti-cancer drugs at 30% of their MRP, expecting to reduce their MRPs by 20% to 70% and save patients approximately ₹2,500 crore annually.

A uniform margin cap on all medicines may not work: Centre

The Centre has argued that trade margins cannot be standardised across all medicines because distribution costs and commercial requirements vary depending on the product and location.

Under the DPCO, 2013, the ceiling price of a scheduled medicine is calculated by taking the average price of brands and generic versions with at least 1% market share and adding a 16% retailer margin. The resulting ceiling price is the maximum at which the medicine can be sold, although manufacturers can determine how the margin is distributed between wholesalers and retailers within that ceiling.

The affidavit states that ceiling prices have been fixed for 935 formulations, while retail prices have been fixed for 3,881 new drugs.

For non-scheduled medicines, however, manufacturers are free to determine the initial launch price. The NPPA monitors subsequent increases, which generally cannot exceed 10% over the MRP prevailing during the preceding 12 months.

The Centre has stated that the actual price increase for non-scheduled formulations was 5.6% for the 12-month period ending April 2025, attributing this to competition in the market.

The government has contended that a higher trade margin may be necessary for inexpensive medicines, medicines sold in areas with low sales, products requiring specialised handling or cold-chain storage, and medicines that occupy shelf space for long periods because of low turnover.

It has also cited concerns raised by associations representing micro, small and medium pharmaceutical manufacturers, which have warned that a uniform trade margin cap could affect employment and the availability of medicines in remote areas. According to the affidavit, smaller manufacturers often depend on local traders and multiple distribution channels to reach such areas.

The Centre states that India's pharmaceutical market is competitive and medicine prices are relatively low. However, patients have limited bargaining power and often lack information about alternative medicines and their prices which can lead to malpractice despite competition among manufacturers.

High margins on hospital consumables also under examination: Centre

The Centre has acknowledged concerns about the pricing of hospital consumables, including products used during medical procedures.

The affidavit addresses the issue of hospitals preferring consumables that carry high MRPs and margins despite their low prices to distributors or hospitals. While supplies are ordinarily included in package rates negotiated under government health schemes and insurance arrangements, patients paying directly for treatment may be billed separately at the MRP, the affidavit notes.

The Centre has contended that fixing a uniform percentage margin for hospital consumables is more complicated because their prices vary widely, from as little as ₹1 to ₹350 or more. A single percentage-based margin, it states, may not adequately cover the costs associated with selling inexpensive consumables. Further, differences in nursing and administrative charges across hospitals add to the complexity it says.

The affidavit further notes that high trade margins are sometimes used by retailers to promote particular medicines, especially specific local brands in certain geographical areas. The Centre's affidavit says that such practices are being examined and further interventions would be considered in consultation with stakeholders.

During earlier hearings, the Court questioned why a cancer medicine supplied to retailers for around ₹2,700 could carry an MRP of approximately ₹27,000, and asked the Centre to consider whether a uniform 16% margin could be applied more broadly to medicines and medical devices.

The Supreme Court has scheduled the matter for further hearing on October 27.